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Thursday, August 13, 2009

China's Respect for Intellectual Property

An NYT report on WTO's ruling that China had violated international free trade rules by limiting imports:
Ron Kirk, the United States trade representative, praised the panel’s legal finding. “This decision promises to level the playing field for American companies working to distribute high-quality entertainment products in China,” Mr. Kirk said, “so that legitimate American products can get to market and beat out the pirates.”
Mr.Kirk knows pretty well that this is just a baby step of a diplomatic pressure. When Harry Potter books and DVDs are available for less than 1/10th of the marked price, only the insane and the high-on-ethical-pedestal will be paying a visit to the original showrooms. The U.S producers have long whined at the possibility of missing the huge Chinese boat and have constantly engaged in soft nudging since the Clinton days. You can't blame the Americans - when they're the Chinese's largest consumer, the U.S fiction writers and movie producers and software coders and chip manufacturers expect the potential Chinese consumer to return the favor.
Respect for intellectual property is not big in developing countries. The general public wants to enjoy the fruits at a much cheaper cost. There's an Asian edition by the original publisher for a lot of products which are quite less than what their western counterparts pay. But that pales in comparison to the bootlegged version available at the mom & pop store. In countries like India where law enforcement itself is weak, one can't do much but whine. But China has an iron grip on what its subjects can see and buy and can effectively enforce what should and should not be available for consumption. Their current lax ethics seems like an open policy of negligence to what the west has got to say.
China's stronghold is manufacturing and it's not easy to pirate and make them take a plunge. Of course you can manufacture a lesser quality shirt or a cheaper toy, but obviously it doesn't make business sense to 'copy'. Where as most of the western economies' export revenue is knowledge based which can be duplicated with relative ease and hence made money or gotten free. For China to take this issue seriously most of state's revenue should be earned through companies and institutions that are knowledge based. When the treasury coffers aren't getting filled because of shady deals under the tree, the police will wield its baton.
And China is morphing itself away from manufacturing. There are English classes held in football stadiums. It is luring Americans who can't find a job because of the recession. With trillions in foreign reserves, they have started to invest substantially in R&D and communication technologies. They just executed a mass transfer of their population from lower class to middle class by taking advantage of the rapid globalization; even the recession has not bitten them hard - in fact their stimulus package is touted by economists to be the most effective. The government has stepped up investments in sceince and technology studies & firms.

But their opaque bureaucracy has its drawbacks. The state recently instituted a policy where every computer bought will come with a software installed that's supposedly designed to filter 'inappropriate content'. Not just pornography (what's wrong with that?) but any foreign site that riles the Chinese action & policies. Youtube and blog sites are banned on whims and fancies. The press is not free; the judiciary has its limits; one needs permission from the local authorities for a peace protest march. Add to this other social problems like the imbalance in male/female ratio because of their one-child policy (which obviously leans towards a male progeny) and an educated middle-class that has been clamoring for more information and freedom.

China has had and will have a hard time trying to transform its huge young population into knowledge force and at the same time checking their tweets and facebook status (figuratively speaking). If the state loosens its hold and unleashes the power of cooperation in every sense, I believe they'll command a bigger piece of 'services & innovation' pie. Until that happens, their markets (not so black, they're quite open in the streets) will continue to support pirates. Of course, there will always be some sort of violation - copiers, scanners, video tools will be put to use. But it wouldn't as flagrant as it is today.

2 comments:

Freehit said...

"For China to take this issue seriously most of state's revenue should be earned through companies and institutions that are knowledge based." Good analysis. Rooting out piracy in China, or for that matter across most of Asia, is virtually impossible. May be because it has to do with the mindset of the people? Thirudanai paarthu thirundha vittaal...

Prasad Venkataramana said...

Siva,
Piracy is like terrorism in this sense: one can't root it out completely but just keep it under control where the loss & menace is limited. Even in the U.S most of the music downloads are illegal and there a bunch of sites that host pirated e-books. The business model in the entertainment industry has evolved to accommodate such shoots: you can buy a song instead of a CD from iTunes, buy a Kindle edition from Amazon at a lower cost, Netflix InstantPlay movies, etc. When it comes to industrial copyrights, patents & trademarks there's pretty strong law enforcement. And cost effective solutions have been seeing the light of the day: if you don't want to pay for Windows you go for Linux, and Google Docs/Zoho instead of MS office. Low cost netbooks are now a rage; there are a great deal on online applications that have supplanted their download-and-install counterparts. Such changes gives the user a viable alternative.